Spot gold jumped 1.11 percent to $1,729.76 an ounce, its highest level since December 8, and far surpassed both its 100- and 200-day moving averages in the morning.

It had built on the previous session's gains after Federal Reserve Chairman Ben Benanke said he would be ready to take further measures to stimulate the economy, while extending by 18 months plans to keep interest rates at zero.

But buying turned to profit taking by the afternoon as the euro fell off five-week highs to trade roughly unchanged against the U.S. dollar.

At 5.00 p.m. EST (2200 GMT), bullion was down 0.06 percent at $1,718.99 per oz. U.S. gold futures for February delivery held onto gains to rise 1.19 percent to $1,719.9 per oz.

Even after the pullback on Thursday afternoon, gold has risen 10 percent year to date, and alongside copper, which is up 13 percent, has surpassed the stock market's gains so far this year.

Commerzbank analyst Daniel Briesemann warned that gold might be vulnerable to profit-taking after the run-up, but said long-term investor appetite remains firm.

"At the moment everything points to even higher prices, given the strong risk appetite, the better mood among market players, the strong equity markets and the weak dollar," he said.

Others agreed that sentiment surrounding gold had improved.

"The strong rally in gold changed what, prior to the (Fed's) announcement, had been a test of gold's resolve," said Saxo Bank senior manager Ole Hansen.

"The Fed statement changed all that and from thinking that the gold rally potentially only had one year left to run, it could now continue for longer," he said.

GOLD EXPECTED TO RISE IN 2012

A poll by Reuters showed most expect gold to continue its bull run for a 12th year in 2012 as interest rates stay low and central banks continue buying.

The survey of 45 analysts predicted an average spot gold price of $1,765 an ounce in 2012, 14 percent higher than last year's average of $1,544. However, the rate of its rise is likely to slow, they said.

Silver was up 1.1 percent at $33.65 an ounce, having tracked gains in gold to its highest in nearly eight weeks at $33.78 an ounce.

Platinum group metals also pulled off session highs. Spot platinum was up 1.76 percent at $1,606.49 an ounce, while spot palladium edged down to $689.72 an ounce from $690.97 previously.

Miner Lonmin, the world's third-largest platinum producer, posted a rise in first-quarter output despite the impact of safety stoppages, which it warned could hit both sales and costs if current trends persist.

Anglo American, whose Anglo American Platinum unit is the world's biggest miner of the white metal, said its stoppages were more than double those of the fourth quarter of 2010. Refined platinum production was 9 percent lower.

Physical gold trade was muted by the closure of markets in China and other key Asian gold-buying centres for the Lunar New Year holiday.

(Reporting by Jan Harvey in London and Carole Vaporean in New York; Editing by David Gregorio and Josephine Mason)

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